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AUDUSD short-term Elliott wave view suggests that the bounce to 0.7316 high ended intermediate wave (X). Down from there, intermediate wave (Y) remain in progress as a zigzag structure. Where initial decline to 0.7049 low ended in 5 waves impulse structure & also completed the Minor wave A lower. Also, it’s important to note that the pair is having a bearish sequence tag & right side lower, therefore, buying is not recommended.

The lesser degree cycles within Minor wave A ended Minute wave ((i)) at 0.7201. A bounce to 0.7240 high ended Minute wave ((ii)). Then a decline to 0.7051 low ended 5 waves in Minute wave ((iii)). Above from there, the bounce to 0.7086 high ended Minute wave ((iv)). Then finally, a push lower to 0.7049 low ended Minute wave ((v)) & also completed Minor wave B. Up from there, Minor wave B bounce remains in progress as double three structure before decline resumes. We expect sellers to appear in 3, 7 or 11 swings within wave B bounce against 0.7316 pivot.

AUDUSD 1 Hour Elliott Wave Chart

• Robbins and Barnier make progress on Irish border;
• Tria seeks to calm investors but stands by budget;
• Dollar softens as Trump once again attacks Fed hikes;
• Oil pares gains as IMF lowers growth forecasts.

A relatively mixed session in Asia overnight has provided little direction for Europe markets ahead of the open on Tuesday, although it would appear investors haven't been short of news flow to get their teeth into.

Reports overnight that 'meaningful progress' has been made between Olly Robbins and Michel Barnier helped the pound hang on to earlier gains as we enter into a real crunch period for exit talks. Naturally, the report lacked any useful detail but that is something we can hopefully hear more about in the coming hours or days, if this is in fact true which isn't always the case.

Sterling traders – who have been very sensitive to any Brexit-related speculation – were surprisingly unmoved by the reports which emerged late in the evening, although this may simply reflect to constant flow of news we've been getting and that this represented more of the message we had been seeing spill out throughout the day. Still, it's rare cause for optimism, although there's clearly still some way to go.

Italy has emerged as a greater cause for concern for Europe recently, with the populist coalition of the eurosceptic right and left seizing the first opportunity to collide with Brussels only to find that it is in fact investors that represent a greater risk to their budget plans. Yields on Italian debt have spiked recently after the government proposed widening its fiscal deficit in order to stand by its election promises, something that has drawn criticism from both the European Commission and investors due to both the impact on its already huge debt levels and it's unrealistic assumptions that risk it missing targets.

Italy's Finance Minister Giovanni Tria has attempted to take a more calm approach in light of rising yields – very different to the hostility shown by his colleagues to both Brussels and the markets – in an attempt to ease some of the pressure on Italian debt but this is failing to calm fears. Tria stood by the need to spend more and generate more growth but urged calmer discussions with Brussels. Taking on Brussels, providing overly optimistic forecasts and attempting to fuel euroscepticism in the country isn't the best way for the government to keep investors on side, much to the annoyance of the most vocal anti-establishment figures in government.

The dollar has been given some reprieve after Trump gave his two cents on the central bank – not for the first time – claiming once again that he's not too pleased with the pace at which they're tightening. Trump has taken it upon himself to regularly chime in on the decisions of the independent central bank, something a President would typically refrain from doing so as to avoid blurring the lines between the two. Some see this as a desire on his part to have more control over interest rates – which may be true – but I think it's much more simple than that, a force working against him is an annoyance and he's laying the groundwork early to direct the finger of blame at when the economy stumbles and markets slip.

The latest IMF forecasts could be taking some of the spark out of the oil rally in the near term, with lower growth naturally weighing on demand. Oil continues to be well supported though as Iranian sanctions prepare to come into force, taking significant supply out of the market, while Hurricane Michael in the US is expected to provide some additional near-term supply disruptions.

Market movers today

It's time for inflation in Norway . We look for a decline in the core rate in August to 1.7% from 1.9% in July, as we expect some of the volatile components to correct lower; more details on page 2.

On the global front, Italy and US yields continue to be the main focus. Italy's Finance Minister Giovanni Tria admitted yesterday that the government is worried about the development and said he hoped that further explanations of the budget measures would bring the spread down from its 'unacceptable' level.

We only have tier-2 global data. The UK and France are due to release manufacturing production while US Producer Prices (PPI) will reveal if inflation pressure is rising on the producer level.

Selected market news

Both US and Italian yields came off a bit from recent highs - for separate reasons - and Brexit optimism grew. However, overall it would have been a rather uneventful session had it not been for Trump . The US President - again - expressed dissatisfaction with the pace of Fed hikes given what he considered a lack of inflationary pressure. He also noted that he had not spoken to Fed Chairman Powell on this matter, as he does not want to interfere with monetary policy. Meanwhile, China noted during US Secretary of State Mike Pompeo's visit to Beijing that Trump is engaged in 'misguided actions' with reference to the trade war.

Following the warning from the EU Commission over the weekend that the Italian fiscal budget not breach eurozone spending, the League's Matteo Salvini accused both EU officials and speculators of seeking to bring down Italy. However, spread widening eased after Italy's Finance Minister Giovanni Tria said that the government is worried about the 'unacceptable' yield spread. The spread between the Italian and German 10Y government bond yield is close to 300bp, the highest in 5Y. He did not suggest that the government had any concrete intentions of changing its budget plan, which the EU has suggested is way too optimistic on notably growth assumptions.

US yields came off a bit after reaching 7Y highs last week and the 10Y yield is just off the 3.21 mark. During the day, the Treasury curve flattened led by close to a 3bp drop in the 30Y. Oil prices are on the rise again , now trading around USD85/bbl, on fears hurricane Michael could lead to supply disruptions in the Gulf of Mexico. This comes after a decline yesterday when the International Energy Agency urged OPEC to up the output as markets enter 'the red zone'. USD weakened slightly and equities were mixed in both the US and Asian sessions.

General Trend:

• Asian equity markets trade mixed
• New Zealand milk firm Fonterra declines after again cutting price forecast
• Softbank declines over 3%, speculated to raise stake in WeWork
• Australian educational provider Navitas rises over 20%, received takeover offer
• PBoC fixed yuan at weakest level since March 2017
• Upcoming Japan retail earnings in focus (ABC Mart, Aeon, Aeon Mall)
• The CEOs of Australia’s largest banks are expected to discuss the interim findings from banking commission on Thursday and Friday

Headlines/Economic Data

Japan

• Nikkei 225 opened +0.3%
• WE WORK.IPO Softbank in talks to own more than 50% stake with a $15-20B investment - press
• Toshiba, 6502.JP To pay additional $40M to Toshiba Memory, Q2 results to include loss related to the payments equal to $82M
• (JP) JAPAN AUG CORE MACHINE ORDERS M/M: +6.8% V -3.9%E; Y/Y: 12.6% V 1.8%E
• (JP) Japan Chief Cabinet Sec Suga: no change to thought that mobile bills can be cut by 40%

Korea

• Kospi opened +0.1%
• (KR) President Trump: Summit with North Korea will be after midterm elections on Nov 6th
• CJ, 001040.KR Expected to acquire Schwan in the US for $2.6B - press

China/Hong Kong

• Hang Seng opened +0.4%, Shanghai Composite +0.1%
• (HK) According to JPMorgan, daily avg revenue for Macau casinos rose by over 15% y/y during Golden Week - US financial press
• (HK) Hong Kong Chief Executive Lam Policy Address: To increase land supply for public housing; confirms to ban e-cigarettes
• (CN) China PBoC Open Market Operation (OMO): Skips OMO v skipped prior: Net: CNYB drain nil v CNY60B drain prior (drains liquidity for the 9th straight session, 4th consecutive skip)
• (CN) China PBoC set yuan reference rate: 6.9072 v 6.9019 prior
• (CN) Former PBoC Advisor Yu Yongding said hard to imagine yuan (CNY) currency will fall to a level that could trigger financial crisis - US financial press
• (US) US Treasury Sec Mnuchin has warned China on competitive currency devaluation - FT

Australia/New Zealand

• ASX 200 opened +0.1%
• FCG.NZ Cuts 2018/19 forecast farmgate milk price to NZ$6.25-6.50/kgMS (prior $6.75/kgMS); says global demand is not matching current increases in supply [-0.4% in NZ, -1.9% in AU]
• NVT.AU Gets preliminary non-binding buyout offer at A$5.50/shr from BGH Capital consortium [+21%]
• (NZ) New Zealand Sept Card Spending Retail M/M: 1.1% v 0.6%e; Card Spending Total M/M: 1.3% v 1.2% prior
• (AU) Australia Oct Westpac Consumer Confidence Index: 101.5 v 100.5 prior; m/m: +1.0% v -3.0% prior
• MNF.AU Guides FY19 (A$) Net 12.8M, EBITDA 29.1M; FY20 Net 15.0-16.5M; EBITDA 33-36M, ahead of acquisition from Inabox Group [-8%]
• (AU) RBA Deputy Head of Economic Analysis Coombs:expectation is that GDP growth will remain a little above 3% for the next year or so, which will further reduce spare capacity in the economy

Other Asia

• (SG) Singapore Central Bank (MAS) Menon: No need to overreact on global risks; global economy has underlying resilience

North America

• (US) Fed's Kaplan (dove, non-voter): hopeful that preferred rate path won't invert yield curve; currently unclear if curve is moving away from inversion
• IGC Filed patent application with the USPTO as part steps in the development and commercialization plan for hemp/CBD energy drink [+10% afterhours]
• IMF: Near-term risks to global financial stability have increased somewhat, medium-term risks remain elevated due to easy financial conditions
• (US) US Fed Williams (moderate, voter): Fed nearing normal policy from normalizing process; see inflation right on target and strong labor market; Expect further gradual rate increases
• SHLD Said to hire M-III Partners to prepare for bankruptcy filing which may come by as early as this week - US financial press
• SVA Says it became aware on Oct 8th that unauthorized changes have been made to Hong Kong Companies Registry for the company; Board member of Sinovac Beijing held board meeting with authorization

Europe

• (UK) UK BoE Deputy Gov Broadbent: Govt could stop issuing debt linked to RPI; large change to UK inflation-linked gilts would risk legal challenge; CPI is superior to RPI as a measure of inflation (US session)
• (UK) UK PM May said to 'force' cabinet into new Brexit compromise - UK Press
• (UK) Approx 30 Labour Party MPs said to be prepared to support the Chequers deal - UK Press

Levels as of 01:30ET

• Hang Seng +0.7%; Shanghai Composite +0.1%; Kospi -0.8%; Nikkei225 +0.1%; ASX 200 +0.1%
• Equity Futures: S&P500 -0.1%; Nasdaq100 -0.0%, Dax -0.1%; FTSE100 -0.0%
• EUR 1.1515-1.1492; JPY 113.11-112.93; AUD 0.7127-0.7103;NZD 0.6496-0.6475
• Dec Gold +0.1% at $1,192/oz; Nov Crude Oil -0.5% at $74.61/brl; Dec Copper -0.1% at $2.81/lb

For the 24 hours to 23:00 GMT, the EUR slightly rose against the USD and closed at 1.1496.

Macroeconomic data showed that Germany's seasonally adjusted trade surplus widened to €17.2 billion in August, compared to a surplus of €16.5 billion in the prior month. Market participants had expected the nation to post a surplus of €16.2 billion.

In the US, data indicated that the US NFIB small business optimism index slid to a level of 107.9 in September, compared to market consensus for a drop to a level of 108.0. In the previous month, the index had recorded a reading of 108.8.

In the Asian session, at GMT0300, the pair is trading at 1.1508, with the EUR trading 0.10% higher against the USD from yesterday's close.

The pair is expected to find support at 1.1455, and a fall through could take it to the next support level of 1.1402. The pair is expected to find its first resistance at 1.1538, and a rise through could take it to the next resistance level of 1.1568.

Amid lack of macroeconomic releases in the Euro-zone today, traders will keep an eye on the MBA mortgage applications followed by the US producer price index for September, set to release later in the day

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 0.38% against the USD and closed at 1.3143.

In the Asian session, at GMT0300, the pair is trading at 1.3158, with the GBP trading 0.11% higher against the USD from yesterday’s close.

The pair is expected to find support at 1.3073, and a fall through could take it to the next support level of 1.2989. The pair is expected to find its first resistance at 1.3202, and a rise through could take it to the next resistance level of 1.3247.

Looking ahead, investors would await UK’s trade balance data, gross domestic product, industrial production and manufacturing production, all for August, slated to release in a few hours.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.07% against the JPY and closed at 113.02.

In the Asian session, at GMT0300, the pair is trading at 113.02, with the USD trading flat against the JPY from yesterday’s close.

In the economic news, Japan’s machinery orders surprisingly climbed 6.8% on a monthly basis in August, following an advance of 11.0% in the previous month. Market participants had anticipated machinery orders to drop 3.9%.

The pair is expected to find support at 112.80, and a fall through could take it to the next support level of 112.57. The pair is expected to find its first resistance at 113.32, and a rise through could take it to the next resistance level of 113.61.

Trading trend in the Japanese Yen today is expected to be determined by Japan’s machine tool orders for September, due to be released in a while.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD marginally declined against the CHF and closed at 0.9921.

In the Asian session, at GMT0300, the pair is trading at 0.9908, with the USD trading 0.13% lower against the CHF from yesterday’s close.

The pair is expected to find support at 0.9891, and a fall through could take it to the next support level of 0.9875. The pair is expected to find its first resistance at 0.9940, and a rise through could take it to the next resistance level of 0.9973.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.09% against the CAD and closed at 1.2943.

On the data front, Canada's seasonally adjusted housing starts unexpectedly fell to a two-year low level of 188.7K in September, defying market expectations for a rise to a level of 210.0K. In the preceding month, housing starts had recorded a reading of 201.0K.

In the Asian session, at GMT0300, the pair is trading at 1.2943, with the USD trading flat against the CAD from yesterday's close.

The pair is expected to find support at 1.2917, and a fall through could take it to the next support level of 1.2890. The pair is expected to find its first resistance at 1.2987, and a rise through could take it to the next resistance level of 1.3030.

Locking forward, investors would await Canada's building permits for August, slated to release later in the day.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the AUD rose 0.45% against the USD and closed at 0.7106.

LME Copper prices declined 2.0% or $42.0/MT to $6219.0/MT. Aluminium prices rose 0.8% or $50.0/MT to $2031.5/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7117, with the AUD trading 0.15% higher against the USD from yesterday's close.

Overnight data revealed that Australia's Westpac consumer confidence index rose 1.0% on monthly basis to a level of 101.5 in October, compared to a level of 100.5 in the previous month.

The pair is expected to find support at 0.7072, and a fall through could take it to the next support level of 0.7026. The pair is expected to find its first resistance at 0.7145, and a rise through could take it to the next resistance level of 0.7172.

Going ahead, traders would closely monitor Australia's consumer inflation expectations for October, scheduled to release overnight.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.